1. Land and Poverty Conference 2017: Responsible Land Governance—Towards an Evidence-Based Approach
March 20-24, 2017
Washington, DC
Searching for Engel in Buenos Aires: An Inquiry into Land Use Regulations and Informal Housing
Eric J. Heikkila, Professor & Director, Office of Global Engagement Price School of Public Policy University of Southern California
Robin M. Rajack, Lead Specialist
for Housing and Urban Development Inter-American Development Bank
Julia G. Harten, PhD Student Price School of Public Policy University of Southern California

2. Content
I. Background & Motivation II. Model Specifications: Unadorned Engle Curve Base Model with Land Use Zoning Multiple Land Use Jurisdictions Monocentric Model III. Discussion Q&A

3. Background & Motivation

4. The Issue Global trend: urbanization = migration
Urbanization/ migration in less developed countries  informal settlements + a dual urban housing sector
Informal settlements: outside regulatory framework
Land use regulation: (1) type of use + (2) intensity of use
Absorptive capacity < population  informal settlements
Photo: Sao Paolo, Brazil

5. Land Use Regulation Potential Benefits: Open space preservation
Rationalization of public goods provision
Infrastructure
Public safety …
Drawbacks:
De facto land supply restrictions
Relationship between location <-> access <-> land value
scarcity of attractive land,
spatial segregation …

6. Implications: Sustainable Development
Substandard physical conditions
Crowding, incomplete property rights
Public goods provision
Transportation, utilities, water & sanitation
Education, public safety
Natural hazards
Access to economic opportunity

7. Policy Debates
Recognition of reality & nuisance of informal settlements  policy debate, but little evidence
Inquiries into mechanisms involved
Market explanations
Policy explanations
Importantly: policy focus on (visible) outcomes, rather than causes of informal settlements

8. Aim of this Paper Fill a gap in the literature
Develop a model that incorporates both (i) the formal and (ii) the informal housing sector into a single framework of analysis
Extension of Heikkila & Lin (2014)
Part of IADB commissioned project
Implementation with data from cities in Brazil (Campinas) & Argentina (Buenos Aires)

9. Model Specifications:
Unadorned Engle Curve

10. Unadorned Engle Curve Grounded in consumer choice theory
Change in consumption profile in relation to changes in income

11. Model Specifications: Base Model with Land Use Zoning

12. Base Model with Land Use Zoning
Introduction of uniform LUR
Suboptimal housing consumption for the poor:
Overconsumption in the formal sector
Consumption in the informal sector

13. Base Model with Land Use Zoning
Calculating welfare effects of LUR:
Difference between (i) observable housing consumption spending and income and (ii) estimated ICC/ Engle curve
 estimate of LUR induced welfare loss
Different outcomes depending on institutional setting:
Developed economies: LUR  increase in housing price  low income earners move away
Developing economies: LUR + weak institutions (+ job concentration in few urban centers)  non-compliances  low income earners are pushed into informal settlements

14. Model Specifications: Multiple Land Use Jurisdictions

15. Multiple Land Use Jurisdictions
Introduction of dual zoning regimes
2 main types of adjustment:
Some over-consumers: consume less formal housing through sorting
Some consumers of informal housing: consume formal housing

16. Multiple Land Use Jurisdictions
Introduction of many zoning regimes
Limiting case (= a rich variety of jurisdictions)  uncover a classic Tieboutian setting

17. Multiple Land Use Jurisdictions
Introducing multiple land use regulations regimes
some households ‘get back on the Engle curve’
these households consume housing formally through sorting in the jurisdiction that matches their preferred expenditure profiles
Insight: If multiple LUR ‘service’ all income levels, multiple LUR minimize welfare loss

18. Model Specifications:
Monocentric Model

19. Monocentric Model Classic model of urban economics
Agents trade-off: access <-> space consumed
Model of urban form: concentric rings around a central business district
Distance vs. Compliance

20. Monocentric Model Introduction of uniform LUR
Taking into account location uniform LUR plays out differently by location

21. Monocentric Model vs. Multiple LUR
Both (1) the monocentric model and (2) the model with multiple land use regulations induce sorting 
Monocentric model: explicit spatial sorting 
Multiple LUR: sorting into jurisdictions
Combining the two models   future research agenda

22. Discussion

23. Discussion: Complicating Factors
Housing has 3 peculiar characteristics:
(1) complexity, (2) fixity, i.e. housing directly relates to urban land and location, (3) durability, i.e. a commodity market exists in conjunction with a stock market
hedonic price model
Government action
Strategic (1) supply, or (2) withholding of public services
Alters the relationship between LUR <-> informal settlements
Rural-urban Migration
Sudden increase in population pressure alters the relationship between LUR <-> informal settlements
Future Research
Agenda

24. Q&A

25. Thank you for your attention!
Land and Poverty Conference 2017: Responsible Land Governance—
Towards an Evidence-Based Approach
March 20-24, 2017
Washington, DC
Thank you for your attention!
Eric J. Heikkila, Professor & Director, Office of Global Engagement Price School of Public Policy University of Southern California
Robin M. Rajack, Lead Specialist
for Housing and Urban Development Inter-American Development Bank
Julia G. Harten, PhD Student Price School of Public Policy University of Southern California